Aggressive Subprime College Industry Lobby Group Ratchets Down — For Now

Cable news calls Penny Lee a "Democratic strategist" but she's paid by subprime colleges to strategize against Democratic President Obama's efforts to rein in that industry's abuses.

The $35 billion for-profit college industry gets most of its revenue –for many of the big schools, over 90 percent of its revenue — from federal financial aid, a.k.a. your tax dollars. The industry has lobbied hard in recent years to avoid accountability for high-priced, low-quality programs, even after multiple investigations have exposed waste, fraud, and abuse in the sector. But the newspaper The Hill has just reported that the for-profit college advocacy group Coalition for Educational Success (CES) has now dramatically reduced spending on lobbying. Last year, the group spent more than $1.8 million on lobbyists, but in the first three months of 2012 its spending was down to $190,000. That’s still a considerable amount, but CES terminated its contracts with several outside lobby firms.

CES managing director Penny Lee told The Hill that the group has “suspended lobbying activities” and has stopped asking member companies for financial support to pay for lobbying. Lee also runs Venn Strategies, a company that remains a registered lobbyist for CES but has done no lobbying for the group in the first three months of 2012. One lobbyist, Empire Consulting Group, was paid $30,000 to lobby for CES in that period. But Wexler & Walker Public Policy Associates, Singer Consulting, and the Raben Group have all reported to Congress that they have stopped lobbying for CES.

What is CES, and what’s going on?

CES’s founders include private equity executives Lincoln Frank and Avy Stein. Frank is managing partner of Quad Partners, which invests in for-profit education businesses. Stein is chairman of the board of Education Corporation of America, which operates the for-profit schools Virginia College, Ecotech Institute, and the Golf Academy of America.

What did Frank and Stein create? CES, right out of the box, seemed to take an even more aggressive stance than the larger for-profit college trade association, APSCU. CES pushed extra hard to undermine the Obama Administration’s “gainful employment” rule, which was aimed at cutting off federal financial aid to career education programs that consistently left students deep in debt. During the fight, according to Senator Tom Harkin (D-IA), he and Stein, by the Senate dining room, got into a heated discussion during which Stein promised to “make life rough for me” if Harkin didn’t back down. “I took it as a threat — it was one of the most blatant comments ever made to me in my years in the Senate,” Harkin told the New York Times. Stein, who had bought lunch with Harkin in a charity auction, denied threatening the senator.

But CES’s pugnacious approach was well-established. The group’s original public face was Lanny Davis, known for representing a range of controversial clients while frequently asserting his credentials as a “liberal Democrat.” In defense of the subprime college industry, Davis combined labored arguments against the gainful employment rule with baseless attacks on the ethics of Department of Education officials. Davis eventually was eclipsed as CES spokesperson by the smoother Penny Lee, a former Harry Reid aide who regularly appears on cable news shows as a “Democratic strategist” pressing the Obama agenda, even though her day job is to attack Obama Administration policies on subprime colleges.

A while ago, CES removed its list of member schools from its website, but Republic Report has a copy of that list as of October 2011, and it includes:

ATI Career Training Center, punished for fraudulent reporting to authorities by the state of Texas after a series of investigative reports by WFAA-TV in Dallas.

ITT Technical Institute, whose training documents included a “Pain Funnel” instructing recruiters to “poke the pain” of prospective students to manipulate them into enrolling.

Education Management Corp. (EDMC), owner of the Art Institutes and others, which the U.S. Justice Department and half a dozen states have sued for fraud, alleging the company paid its recruiters based on the number of students signed up, in violation of federal rules. (EDMC denies these claims.)

Lee and others told The Hill that CES cut back on lobbying because the intense fight over “gainful employment” ended, with the Obama Administration, under pressure from the industry and its allies in Congress, deciding to water down the rule and postpone its implementation. The for-profit education industry continues to fight on Capitol Hill, seeking to roll back or avoid new accountability measures, including with respect to recruiting military service members and veterans. But it looks as if CES’s organizers are, for now, OK with relying on APSCU and the lobbying efforts of individuals schools to wage the fight.

The Hill reports that CES is instead focused on promoting an industry code of conduct it issued last fall through its affiliated group, the Foundation for Educational Success. Unfortunately, that code — purportedly an attempt to raise the quality and ethical standards for career colleges — has been beset by some of the same shortcomings that have characterized the industry generally. CES attempted to present its standards-setting panel as an independent body when it is, in fact, an arm of the industry. It announced an advisory board that included former governor Thomas Kean,without disclosing that Kean is a partner at Frank’s Quad Partners firm. The standards themselves focus on providing students with information, but not so much on providing accurate information, and many of the standards are, in fact, already required by federal law. And the penalties for violating the code are pretty weak — they might take your name off the website.

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